What Happens If The Lock-In Period Expires?

In the event of you not settling on your loan within the lock-in period, you may be unable to keep the interest rate and the amount of points that you had locked-in. This situation could be the result of any delays and holdups in the processing of your application caused by any party involved in the settlement process. For instance, your loan approval could be held up if you do not submit the proper documents to your lender or if the lender is waiting on documents from employers, home inspectors, and the individuals that are selling the home.

Sometimes, the lenders themselves cause the delays. This is likely to happen when the loan demand is intense or if the interest rates suddenly fall by a significant amount. When your lock-in expires, lenders are likely to offer you the loan at the current interest rate and the current amount of points. If market conditions happen to increase the interest rates, you will be charged more for your loan by the lender.

A reason for why the lender cannot offer you the lock-in rate following the expiry period is that the lender cannot sell the loan to shareholders at the lock-in rate that was given to you. This is because the lenders have agreements with the shareholders to buy the loans at the lock-in terms. If that agreement expires at approximately the same time that your lock-in expires and the market interest rates go up then the lender cannot afford to offer you the loan with the same terms. However, lenders who really want to keep your loan will be more flexible when discussing your rates is your lock-in expires before the settlement is reached.